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Big Business Is Not Perfect, but Its Essential Virtues Are Underrated

There’s one economic bogeyman everyone across the
political spectrum seemingly loves to hate: big business.

A 2014 ComRes poll reported net trust in “big
business” at minus 48pc. In today’s political
environment that figure would surely be much worse.

For Corbynite socialists, large corporations personify
capitalist inequality and injustice. They deliver extortionate chief executive remuneration and
pay workers “poverty wages”, and women less than men.
Major companies are said to under invest in staff and dine out off
government education and tax credit spending, all the while
avoiding their “fair share” in taxes. Others hover,
vulture-like, to “profiteer” off the NHS and other
public services.

Views of big business are
extraordinarily harsh. We forget their positive social role at our
peril.

Are we all getting a bit carried away here? In his new book, Big
Business: A Love Letter to An American Anti-Hero, the American
economist Tyler Cowen defends large corporations, arguing critics
have lost a reasonable sense of perspective. His thought-provoking
corrective doesn’t argue big business is perfect, but
underrated. He is right.

We take the “two straightforward and essential
virtues” of business for granted, says Cowen. Companies
produce stuff we enjoy and consume, and give vast numbers of us
jobs. That saying this sounds so alien shows how far the
anti-business zeitgeist, pushed through news and culture, permeates
our psyche. Most of people’s declared protestations against
major companies though are on issues not unique to them or where
they are clearly not “worst offenders”.

For a start, large companies pay significantly higher wages than
small ones. Office for National Statistics data for 2017 show
median full-time earnings for businesses with more than 250
employees were 15pc higher than those with 10-49 employees.

The reason is simple: big businesses are generally more
productive. They deliver goods or services demanded by others. Huge
firms, such as Amazon, Google and the major supermarkets, innovate
to provide us new and varied products at affordable prices. The
poor benefit most from this.

Jobs provided by major businesses give our lives meaning too.
Though we talk of “going to work” disparagingly,
productive jobs improve life satisfaction. Evidence presented by
Cowen even suggests that, for poorer people, work is a relative
safe-haven from stress. This is not surprising given the challenges
at home for those living in relative poverty. Far from opposing
social progress too, large corporations are often the most
responsive institutions to evolving norms, sometimes to the
annoyance of conservatives. Consider the swift removal of the
“racist” chocolate ducklings by Waitrose, social
networks controversially banning “hate speech” and the
Gillette TV advert denouncing “toxic masculinity”.
Firms respond to cultural sensitivities because profits usually
require inclusivity and not offending potential customers.

Examples can and will be found of harassment, discrimination and
immoral behaviour within large businesses. Enron’s accounting
chicanery, Goldman Sachs’s manipulation of derivative
markets, and VW’s cheating on emissions spring to mind. But
bad conduct is largely a reflection of human frailties, not
inherent to big business.

There’s little evidence that big businesses behave worse
as a cohort than non-profit institutions or governments. Repairmen,
door-to-door salesmen or distant relatives are as likely to rip you
off as any large business. HMRC says small businesses as a group
are responsible for the largest proportion of unpaid tax.

Yes, some large businesses are too close to politicians and
benefit from unjust favours, tax breaks or privileges. But overt
cronyism is a smaller problem than imagined. Corporations spend
small amounts on lobbying relative to, say, advertising.

Finally, businesses’ role in determining electoral
outcomes is also overplayed. No Fortune 100 chief executive donated
to Donald Trump’s presidential campaign. The business
community here overwhelmingly opposed Brexit too, although the CBI
has lobbied hard for a form of customs union within Theresa
May’s proposed Withdrawal Agreement, contributing to
today’s current political turmoil.

Yet if big businesses aren’t ripping off workers and
customers, resisting social change, engaging in corruption and tax
evasion and determining political outcomes relative to other
economic groups, then why are they so resented?

Cowen argues that we tend to process thoughts about big
businesses as if they are people. That means we often feel
disappointed by them when they fail us or aren’t as
responsive to our demands as other groups.

While this may be structurally true, it doesn’t
satisfactorily explain big businesses’ decline in status in
recent decades. Better theories to fit that timeline in the UK
would incorporate the financial crisis, government spending
restraint alongside corporate tax rate cuts, and the business
community largely vacating the pitch in arguing for free
enterprise.

More uncomfortable explanations would acknowledge too that
globalisation creates big businesses less obviously
“British” or “American”, playing into
voters’ long-noted economic scepticism of all things foreign.
Greater demands on business from government to fulfil social policy
(on pay, climate change, money laundering and much else) likewise
creates more issues for business to “fail” in the
public consciousness.

Whatever the reason, Cowen’s central point is undoubtedly
correct: views of big business are extraordinarily harsh. We forget
their positive social role at our peril.